Puerto Rico declines to say what, if any, fiscal 2018 debt service to expect

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Puerto Rico’s government and Oversight Board have declined to say what debt service bondholders should expect in the coming fiscal year despite repeated inquiries.

According to the board’s March approved fiscal plan, the bonds most closely associated with Puerto Rico’s government would pay $404 million in debt service in the coming fiscal year. This would be 12.3% of the $3.28 billion debt service due.

The board certified the fiscal plan in mid-March.

On June 2 the board responded to new Puerto Rico government estimates of revenues by revising the certified fiscal plan. This led the board to cut its estimate of fiscal year 2018 General Fund revenue by $278 million and increase its estimate of all government activities by $396 million. These changes are before the $924 million in revenue measures that the board instituted. Most of this would be distributed mainly to the General Fund.

On May 31 Gov. Ricardo Rosselló said, "The measures implemented in [my proposed] budget are those that we had established in the fiscal plan." However, that governor-proposed fiscal year 2018 budget had $0 for debt service. Fiscal year 2018 starts July 1.

Since June 1 The Bond Buyer has repeatedly contacted spokesmen for the government and the board asking them about what and how much debt service they are planning to provide to bondholders in fiscal year 2018.

The spokesmen have said they were working on getting the information ready. The governor was also contacted.

As of press time Friday neither spokesmen nor the governor had provided an answer.

The impact of the June 2 fiscal plan revisions on the original fiscal plan’s $404 million debt service hasn’t been specified.

A source close to the COFINA Seniors group said the group believed the government was allotting $519 million for the payment of COFINA bonds in fiscal year 2018. The source said this would be more than adequate for the payment of the Puerto Rico Sales Tax Financing Corp. (COFINA) senior bonds’ debt service. The amount of COFINA debt service due in fiscal 2018 is $737 million, according to Puerto Rico’s mid-October proposed fiscal plan, and $709 million, according to the mid-March certified fiscal plan.

However, according to a May 29 letter from FAFAA executive director Gerardo Portela Franco to board executive director Natalie Jaresko, the amount of sales and use tax allocated to COFINA and two other minor draws in the revised revenue estimate is $519 million less than had been the case in the original certified plan.

According to the Puerto Rico Oversight, Management, and Economic Stability Act, the certified fiscal plan is supposed to serve as the guideposts for budgets and debt payments through fiscal year 2026. It is meant to oversee the actions of Puerto Rico’s government and its payment of debt for the bonds of the authorities most close to the government. The plan covers $52 billion in debt.

While the plan projected paying an average of 24% of debt service, it called for Puerto Rico to pay a lower percent of debt service in fiscal year 2018.

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